Blog

Feb 06

Satisfied With Last Year’s Performance? Are You Sure You Should Be?

You’re looking over last year’s numbers, feeling pretty satisfied about the results for 2018. Production increased and you have a lot to feel proud of overall. But what about those customers or subscribers who said goodbye to you in 2018? If you haven’t yet calculated your end-of-year churn, you should feel a little less comfortable. Looking at that churn rate is key to your business’s success.

Most business owners say that if they could change one thing about their business, it would be their customer churn rate. Retention is key to success because it almost always costs less to retain a client than it does to attract a new one. Increasing client retention and reducing churn in the coming year can only happen if you know what your churn rate was last year.

Calculating Churn

It’s not rocket science! One of the most straightforward ways to express yearly churn is to calculate it as a percentage of customers lost: Divide the number of customers you started with in 2018 by the number of customers you lost in 2018. Churn can also be measured by the value of recurring business lost or as a percentage of recurring value lost. Choose the measurement that makes the most sense for your business.

Why is this number so important? Think about it this way: Beyond representing how many customers flew the coop in 2018, churn represents an exponential loss of profit. Each year those lost clients don’t do business with you, you’ve lost a year’s worth of potential revenue.

By tracking customer churn throughout the year — ideally quarterly — in addition to end-of-year churn, you’ll begin to notice trends that you can address. Does the highest churn always happen in the third quarter? Did you sell more subscriptions in 2018 but lose more longtime customers in the course of chasing those leads? Noticing how these threads lead back to your losses is the first step in decreasing your churn rate.

Of course, it’s impossible to calculate your customer churn if you haven’t been tracking and measuring it throughout the year. If you haven’t, you now have the opportunity to do so for the coming year. Add monitoring these numbers to your resolutions for 2019.